If investing is something that holds your interest you may have already done some reading and research about the topic. If you have, you probably already know that one of the key ingredients to building wealth is time. The sooner you start investing the faster you can build wealth. In addition, if you start investing at a young age you can accumulate a larger amount of money than if you wait until you are older to start. With all of that being said, how old must you be to start investing?
1. Custodial Account
By setting up a custodial account under the supervision of a parent or guardian you don’t necessarily have to wait until you are 18 to get started investing. Talk to a trusted adult in your life about investing and feel them out about whether or not they would be willing to oversee such an account for you. Once you have done that you can set up a custodial account with their help. Keep in mind whoever is helping you will have the power to use the money in whatever way they see fit which is why the ability to trust them is so important.
Of course, since you are young, you are probably searching for a way to invest that charges little to no fees and a small account balance requirement to get started. Fortunately there is at least one company that offers this. But keep in mind that setting up a custodial account has other advantages and at least one disadvantage as well. For instance, your tax rate is what will be used for the payment of any dividends and also for withdrawals which should be lower than that of your parents. A disadvantage, however, is that this type of investing could be a drawback once it comes time to apply for financial aid when you are entering college.
2. 529 Plan
If you are interested in saving for college you could have an adult help you set up a 529 plan if you are underage. This kid of investment plan has tax benefits that could help your parents. You can open either of two different types of 529 plans. No matter whether you choose the prepaid tuition plan or the college savings investment plan you will have certain rules that must be followed in order to invest. Some of these rules differ depending on what part of the country you live in so do your homework and consider all of your options carefully before choosing this one.
3. Guardian Account
Another way to invest is a guardian account. You will still need to have an adult help you set it up and manage it, but money can be withdrawn from it at any time and for whatever reason you want. Whoever is helping you will be responsible for taxes and earning. Additionally, they will have control over the account so once again having the ability to trust them is of utmost importance. One of the good things about this type of account is that you can use it for whatever you wish such as a car, first house, or a future business you wish to start or buy.
Even though you must be 18 in some states and 21 in others in order to invest in stocks, there are ways to invest when you are younger, as you can see from the information above. So, how old must you be to start investing? The answer is that it depends on what you want to invest in as well as what kind of help you can get doing it.
What age do you think is the right one to begin investing?
James Hendrickson is an internet entrepreneur, blogging junky, hunter and personal finance geek. When he’s not lurking in coffee shops in Portland, Oregon, you’ll find him in the Pacific Northwest’s great outdoors. James has a masters degree in Sociology from the University of Maryland at College Park and a Bachelors degree on Sociology from Earlham College. He loves individual stocks, bonds and precious metals.